defaulted loan acqusition by co-signing company
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Company A acquired a loan that it cosigned for company B who went bankrupt and defaulted on the loan. How do I put the loan on the books on the books of company A?
Answer
The credit on A's books is obviously the Loan payable, but what would be your debit? How and why did you acquire the loan? Is it an investment in another company? Should it be for an asset or an expense?
Answer
no it was not an investment. The corporation just guaranteed the loan of a buddy who was setting up a business. When the second company went bankrupt and the loan was defaulted the bank came after the corporation. So that is my question, what is the debit???? I am thinking it is a loss due to stupidity on the part of the corporation but can't exactly call it that.
Answer
It is a business loss. You will need to explain the details to your tax return preparer, so he can record the loss correctly on the tax return. For the time being you could post it to bad debt expense or other expense.
